All about property valuation

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The valuation of real estate is the process of determining how much a property is worth. The valuation may be done for different reasons, such as to determine whether the property is eligible for certain tax benefits or as part of conveyancing on an acquisition transaction where the buyer needs to know the value of the property being purchased.

The valuation

Valuation is the process of determining how much a property is worth. The value that a valuator gives to real estate is expressed in “current market value” (VMC) in Rands. It may also be referred to as “market value” or “realizable value”. The valuation process involves:

  • Identifying the market area;
  • Recognizing property features;
  • Calculating an adjusted capitalization rate;
  • Calculating an applicable multiplier, and finally,
  • Calculating the VMC

Current market value (VMC)

When you hire a valuator to determine the value of your property, it is important that you understand what property valuation means. The value that a valuator gives to real estate is expressed in “current market value” (VMC) in Rands. This is the price that a willing buyer would pay a willing seller if neither party was under any pressure to buy or sell at a particular price, and both were aware of all relevant facts relating to the transaction.

The VMC of a property can be calculated by dividing its marketable value by an agreed-upon multiplier factor which takes into account certain elements such as:

  • The supply-demand situation in relation to similar properties;
  • The size and physical condition of the subject property; and
  • Its proximity to amenities such as shops and schools.

A property can be valued through different methods, but it is usually done using one of the following three different methods.

A property can be valued through different methods, but it is usually done using one of the following three different methods.

  • The comparative method: This method involves comparing a property to similar ones recently sold in the area. If your home is larger than most and has more upgrades, that would increase its price. The same holds true for homes that are smaller or older than comparable properties. The comparison must be within a reasonable distance from where you live, as the neighborhood plays a large factor in determining value.
  • Income approach: This approach uses income-producing properties as benchmarks for valuing single-family homes or multifamily apartments or condos because they have similar characteristics (such as location). You can also compare your property’s estimated rental income with other rentals in the area to determine its value and compare your mortgage payments to those of similar loans at other banks to get an idea of how much equity you’ve built up over time

The comparative method

The comparative method is the most common valuation method used by valuators. It is based on the sale price of similar properties in the same area, and it is useful for valuing properties that are not unique or unusual.

The income method

The income method is used to determine the value of a property based on its potential income. It is commonly used for commercial properties, and it’s also known as the capitalization rate method.

Let’s say you have a house that you want to sell, so you hire an agent to help you get it sold. The agent will first ask what kind of property it is and then they will do research into similar properties in your area before setting a price for your house that they feel will be attractive enough to attract buyers who are willing to pay that price or more. This process is called ‘comparative analysis’ and allows them to come up with an asking price that reflects the fair value in their opinion based on comparable sales data from recent years across different areas within South Africa itself (or wherever else people might consider buying).

The cost method

The cost method is the most conservative valuation method. It’s used to value land only and cannot be used for buildings or other improvements on the land. It’s based on the cost of replacing the land, therefore it includes all items that would be replaced if the property was sold.

The cost method does not take into account market value, but rather focuses on what it would cost to replace a parcel of real estate with comparable features. The most important determinants in determining this replacement value are:

  • The size of the parcel of real estate being valued;
  • Its location (ease of access);
  • Its tenure (whether it is freehold or leasehold);

The value of a property depends on its location, characteristics, and use.

It’s important to note that location, characteristics, and use all play a role in determining the value of a property. A home with three bedrooms and two baths will have more value than one with two bedrooms and one bath if both homes are situated in desirable locations.

So what makes one location better than another? You may have heard the term “location-location-location” when it comes to real estate investing—and there’s a good reason for that: Location is key for determining value! It might seem obvious, but some areas of town will always be more valuable than others simply due to their proximity to amenities like schools and parks. These kinds of things make your ability to sell your house easier down the road (and make it harder for someone else).

But don’t think you can’t get ahead without an ideal location; there are other factors at play as well. For example: If you’re looking at purchasing a fixer-upper from an owner who needs quick cash fast but doesn’t want his place falling into disrepair while he waits around for buyers…

The Valuator Group

If you’re thinking of selling your home, it can be a good idea to get an independent valuation and find out what it is worth. This will give you a realistic idea of how much money you could make if selling, which might help with future planning. You may also want to use the same method when buying another property or making an investment decision on some commercial or residential real estate. For more about valuation services, art valuation, and asset valuations, contact The Valuator Group they will help you.

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